House prices return to last year's record high: Average UK home worth £274,000 as property shortage drives up value
07-16-2015
- Record-low mortgages and post-election activity pushed up prices
- In February average home price dipped to £269,000 ahead of election
- Prices in May were almost six per cent higher than they were a year earlier
By Louise Eccles Business Correspondent For The Daily Mail
House prices are now back at last summer’s record peak as a shortage of homes drives up property values once more.
Official figures show the average UK home is now worth £274,000, the same level as August last year.
They dipped to as low as £269,000 in February as people delayed buying until after the general election, slowing demand and easing price rises.
House prices are now back at last summer's record peak as a shortage of homes driver up property values
But record-low mortgages and a flurry of post-election activity have pushed up prices in recent weeks.
The average home is now typically worth £33,000 more than during the pre-financial crisis peak in January 2008.
According to the Office for National Statistics, prices were almost 6 per cent higher in May than they were a year earlier.
Incredibly, prices grew by 9.3 per cent in the East – double the 4.7 per cent increase in London.
They also jumped by 8.2 per cent in the South-East on the year, but grew by a sluggish 1.9 per cent in the North-East and 2.8 per cent in Yorkshire and the Humber.
Economist Howard Archer, at IHS Global Insight, said: ‘There are increasing signs that housing market activity is now on the up, and we suspect that housing market activity will continue to improve amid reduced uncertainty following the decisive general election result.’.
But, separate figures released yesterday suggests many Britons are struggling to take out a mortgage following the introduction of tough new restrictions in April last year.
In May, 49,000 people were given a residential mortgage, which is 9,000 fewer than a year earlier and a 16 per cent drop.
Meanwhile, 17,500 buy-to-let loans were handed out in May, which is a 12 per cent rise on a year earlier.
The figures will fuel claims that landlords are at an advantage to homeowners and first-time buyers because they are not subjected to the same strict affordability checks.
The Mortgage Market Review was designed to stop irresponsible lending and forced banks to carry out more rigorous checks to ensure applicants could afford the home loan they were applying for.
But lenders have been accused of taking it to extremes and turning people down for new loans and remortgaging even when they can comfortably afford the monthly repayments.
Mark Harris, of mortgage broker SPF Private Clients, said: ‘Surprisingly, given the excellent mortgage rates available, remortgaging was down month on month and on the same period last year.
‘This may be down to homeowners struggling to qualify for new mortgages as a result of tougher affordability criteria brought in under the mortgage market review.
The average home is now typically worth £33,000 more than during the pre-financial crisis peak in January 2008
‘Buy-to-let continues to perform well, with lending up on both new purchases and remortgaging.
‘Lenders like buy-to-let as it is easier to underwrite than residential borrowing because it is not affected by Mortgage Market Review and there are better margins.’
In last week’s Budget, Chancellor George Osborne announced that landlords will see their tax breaks restricted.
He said: ‘We will create a more level playing-field between those buying a home to let, and those who are buying a home to live in. Buy-to-let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income, whereas homebuyers cannot.’
All landlords can currently claim back money on the interest paid on their mortgage at the highest rate of income tax they pay, meaning the wealthiest can claim at a rate of up to 45 per cent.
But this costs the Treasury more than £6billion a year and has been accused of unfairly favouring the growing army of landlords over ordinary homebuyers.
Under new measures, wealthier landlords will be restricted to 20 per cent tax relief by April 2020